CapitalBanc Corporation case 2. 4 1- Management assertion is a set of information that the management provided it to the auditor, so the auditor will make sure there are no material misstatements. According to AU 326, paragraph 3, management assertions can be either explicit or implicit and can be classified according to three categories: Assertions about transactions, assertions about accounts balance, and assertions about presentation and disclosure. The auditor has to keep in mind that the cash is a liquid assets and risky by nature more than other assets.

For that, the primary concern to an auditor with regard to cash are as follows, *Existence is the most concern to the auditors, according to AU 326, paragraph 4, assertions about existence address whether assets or liabilities of the entity exist at a given date and whether recorded transactions have occurred during a given period. *Completeness: According to AU 326, paragraph 4, assertions about completeness address whether all transactions and accounts that should be presented in the financial statements are so included. Rights and obligation is one of the account balance assertions According to AU 326, paragraph 6, assertions about rights and obligations address whether assets are the rights of the entity and liabilities are the obligations of the entity at a given date. * Presentation and disclosure, according to aU 326, paragraph 8, address whether particular components of the financial statements are properly classified, described, and disclosed. 2- Some of the audit procedures that should be applied to cash funds maintained by a client on its business premises are as follows, * The auditors has to ask management about any cash requirements. Perform analytical procedures to test the reasonableness of cash balance. * Obtain a bank cutoff statement directly from the bank. * Prepare a schedule of bank transfers showing all transfers between the client’s bank accounts during the last week of the audit period or near the balance sheet date. Preparing this schedule by using cash receipts and payments journals, yearend reconciliation, year-end bank statement, and cutoff bank statement. * Review funds transfers between bank accounts near the balance sheet date. Prepare a year-end bank reconciliation, so the auditor will make sure if all client cash receipts have been deposited, if all bank deposits have been recorded in cash receipts records, if all client’s cash payments have been paid by the bank, if all bank payments recorded in client cash payment records. * Count all cash on hand at the clients premises. If cash is located in multiple places, count cash simultaneously to avoid double counting. * Review cutoff of cash receipts and disbursements. * Account for the numeric sequence of cancelled cheques.

Investigate missing cheques. * Review monthly client prepared bank reconciliations. * Reconcile the total of the cash count to the general ledger cash balance. * Review disbursement vouchers included in the fund to determine that they are for appropriate expenditures while counting a petty cash. * Investigate any cheques made out to cash or bearer. * Investigate any cheques that were returned by the bank because the client account had insufficient funds. * Review and recalculate transactions of foreign currencies. Trace a sample of entries from cash receipts journal to accounts receivable subsidiary ledger. * Trace a sample of entries from cash receipts journal to accounts receivable subsidiary ledger to bank statements. * Trace a sample of entries from cash receipts journal to accounts receivable subsidiary ledger to bank statements to deposit slips. * Trace a sample of entries from cash payments journal to Accounts payable subsidiary ledger. * Trace a sample of entries from cash payments journal to Accounts payable subsidiary ledger to bank statement. Trace a sample of entries from cash payments journal to Accounts payable subsidiary ledger to bank statement to cancelled cheques. 3- Mistakes or oversights made by Arthur Andersen personnel while auditing the cash funds at CapitalBanc’s 177th Street Branch are as follows, * Based on the case study “According to branch personnel, three keys were required to unlock the cabinet, one of these keys which was in Cordova’s possession who was out of the country at that time”. So, the auditor failed to verify the existence of the three-key security system. The auditors didn’t place their seals on the door to make sure no one will have the access to open the door before the date it was to be opened. The only action that the auditors did was telling the branch’s personnel that they would count the cash funds in the locked cabinet when Cordova returned. * When Cordova returned, Arthur Andersen auditors returned to that branch to count the funds in the locked cabinet, but they did not count the cash funds of the other branches in the same time so they failed to discover the shortage. * Cordova explained that the $2. million was segregated in the locked cabinet because a customer had previously cashed a large CD and insisted that the funds be available on demand, but the staff auditors obtained the documentation for the offsetting liability directly from the CNB personnel without any confirmation from the customer or independently verified by the auditors in any other way. * The auditors also didn’t obtain documentation confirming that the customer had cashed a large certificate of deposit. * The auditors neglected to obtain any evidence to corroborate Cordova’s assertion regarding the customer’s planned use of the funds.